market folly

We're posting up notes from the Ira Sohn Conference.  Paulson & Co founder John Paulson gave a presentation on three long ideas: Caesars (CZR), AngloGold Ashanti (AU) and CVR Energy (CVI).  Paulson is featured in the book, The Greatest Trade Ever.

Paulson's Three Long Ideas

Caesars (CZR): Stock with high option value. Was LBO. Common is only 7% of valuation, $1.7B, Opco Debt $16.9B, Net PropCo debt $4.8B. $23B total cap. So equity gets the upside. LBO guys put $6B in, now equity only $1.7B. Says they are turning around.

Stock owners have not only gaming properties, but Social gaming company worth $6-9, Online gaming could be $24 per share. Key is growth. Are seeing RevPAR growth. Added Octavius Tower. Adding Cleveland. 2013 LINQ in Vegas, Cincinnati.

Online gaming upside option. No debt due until 2015. Three years runway. 2007 they did $2.8B EBITDA, LBO at 11x. Guess they get back, adjusted to new facilities, $3.2B Likes hotels because the rates increase with inflation. Online gaming may be another $300M, so total to peak, get to $3.5, with 11x multiple stock is $138, a 10x upside. (that's way too rosy)


AngloGold Ashanti (AU): Pure gold upside. Been getting crushed, much worse than gold price, correlation has broken down. Bears say just buy the ETF. He says, you're paying more by doing that. Says you're getting the company at only $133 per proven reserves.  It's also worth highlighting that Paulson was buying fellow gold miner NovaGold Resources (NG) in April as well.  We've also previously posted a look at Paulson's gold fund.


CVR Energy (CVI): "A gift from Carl Icahn" Merger Arb transaction. Buy stock at $30.35, tender to offer at $30.00, cost of CCP is $0.35. "Contigent Cash Payment" rights. If they sell company for $36.15 CCP could be worth $6.15, with cost of $0.35, that's a 17.6x return.


P.S. - Don't miss other presentations from David Einhorn, Bill Ackman, Larry Robbins & more: notes from Ira Sohn Conference 2012.